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Making sense of the employment picture

Years ago, a Fortune magazine article bemoaned the fact that many assembly line workers in the automobile industry had insufficient reading skills. The literacy level was so low that instructions had to be presented in picture form — like so many comic books.

It was a sad commentary on the decline in the quality of education. Bill Walsh, the 49ers’ head coach at the time, made the point that cutting back on school sports and music programs removed the primary reason many kids stayed in school long enough to graduate.

The Wall Street Journal weighed in with a Sept. 2 editorial titled “The Idle Army: America’s Unworking Men,” contributed by Nicolas Eberstadt of the American Enterprise Institute. A few pages earlier in the same edition was an article by a staff writer titled “Manufacturers Search for Workers.” Let’s try to make some sense of this dichotomy, because the Federal Reserve raises interest rates on the assumption that we are approaching someone’s version of “full employment.” And rising rates affect all of us who are making investment decisions.

Because of the army of so-called “unworking men,” the suggestion that we are at full employment is, instead, “not even close,” according to the editorial. On the flip side, the number of unfilled manufacturing jobs is at a 15-year high. Openings for jobs that require mechanical and electrical skills have averaged 353,000 per month this year. More of these jobs are being filled with those who have college degrees as they replace those who have only graduated from high school. Those without a high school degree are falling behind in the statistics, because instructions in picture form don’t cut it in today’s computerized manufacturing sector.

Speaking of high school, whatever happened to shop class? In Oakland, a privately funded program with a tenuous future has replaced what used to be part of the school curriculum years ago — another penny-wise and pound-foolish decision. This is true across the country.

Today, it takes about three months to recruit a skilled production worker — about the same amount of time as for a skilled scientist. In a free-market economy, one solution is to pay more money for jobs that are tougher to fill. But this is not as simple as union advocates make it sound. As skilled machinists make higher wages, it can take years before “the word gets out” and nudges enough promising students (including older adults in retraining) to consider something other than, say, technology, health care or service industry careers.

Many people have their own reasons for claiming that the unemployment rate is “off the charts” and that unemployment figures are “bogus” because they don’t include people who have given up looking for work. That may be true, but the sad thing is that those who fall into the category of abject despair are often structurally unemployable because of a lack of training. Or they may be reluctant to move to where jobs are available. Boeing, for example, is struggling to fill high-paying jobs even while offering a relocating bonus, but making a move requires a struggle to overcome inertia.

Mr. Eberstadt, who has written a book on this subject, makes the interesting point that married men look harder for work and are more successful at finding it than those who have never married. He points out that immigrants have better results in finding work than those born in this country. Ex-felons include 1 out of every 8 American males, and this segment has trouble finding work.

The unemployment statistics that get bandied about to support different points of view — political points especially — have much underlying truth that is usually left unsaid. The bottom line is that we have a form of unemployment that no amount of economic growth can solve.

The current number, which by one estimate is about 5 percent, may be a practical reality and a number that would prompt a rise in interest rates, normally. But with a mountain of personal and corporate cash apparently satisfied with a rate of return close to zero, the Federal Reserve’s efforts shouldn’t do much to affect overall rates.

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